LawyersBay
Do you own your own business? Are you looking for a way to control the wealth that it generates without affecting your children’s inheritance? If so, then an irrevocable trust could be the right thing for you.
While it may be called an irrevocable trust, the name is misleading. You can always have it revoked if you wish to. The trust exists to protect the beneficiaries from any debts or liabilities that you have.
Keep reading to learn more about irrevocable trusts and why you should consider them.
Read More: 5 Questions to Ask Your Estate Planning Attorney
Contents
Definition and Basic Structure
It is set up by a settlor and administered by a trustee. The trust itself is a legal entity that is separate from the settlor and is responsible for holding and managing the trust property for the benefit of the beneficiary. The settlor can also determine how the trust should be distributed upon his or her death.
The trustee has a fiduciary duty to administer the trust in the best interest of the beneficiary. An irrevocable trust is an excellent way to protect assets from creditors, minimize or avoid taxes, and provide for heirs.
If you’re considering creating or updating your estate plan, consulting with estate planning lawyers can help ensure that your wishes are properly documented and legally sound.
Benefits of Irrevocable Trusts
This type of trust is difficult to amend or revoke – hence the name irrevocable. Benefits of irrevocable trusts include:
- protecting assets from creditor
- creating tax savings
- maintaining the trust assets
Also, it allows assets to pass without going through the probate process. In addition, trust assets are not seen in public records, providing greater privacy for the grantor’s family and beneficiaries. Due to the fiduciary relationship, the trustee is held to a much higher standard of accountability and must follow the grantor’s wishes.
Types of Irrevocable Trusts
There are various types of irrevocable trusts, each of which has unique characteristics and advantages depending on the trustor’s needs. Living trusts are created while the settlor is still alive and can be used for tax and estate planning.
Trusts for minors are set up to manage assets for a minor child until they reach maturity. Charitable trusts are used to provide for a nonprofit organization or charity. Spendthrift trusts are designed to protect assets and provide for another person’s necessities, while life insurance trusts are made to handle life insurance proceeds.
Features and Considerations
Understanding Irrevocable Trusts Everything you need to know is a complex topic. When contemplating using an irrevocable trust as part of a financial planning strategy, it is important to understand the features and considerations that must be taken into account.
Loss of Control
Once assets are transferred into an irrevocable trust, the grantor typically gives up control over those assets. The trustee manages the trust based on the grantor’s wishes.
Read More: How to Find an Estate Planning Attorney
Tax Implications
Irrevocable trusts have their own tax identification number and may be subject to income tax, capital gains tax, and gift tax rules. Consultation with a tax professional is recommended.
Take Action Today To Secure Your Future
All of the essential information about irrevocable trusts is provided in this article. It is important to educate yourself on irrevocable trusts if you need to use them for your personal or business planning, as the process can become complicated, and mistakes can be costly. Start learning today by consulting an expert on creating and managing an irrevocable trust.
Curious about what else we have to provide? Take a look at our blog post today.